Retirement plans are savings plans that help workers and individual consumers to save for when they get older and can no longer work. Several types of retirement plans exist, and they each have a unique quality. The following are some common types of retirement plans and some information on how they can assist a worker or consumer:
The 401K Plan
The 401K plan is an extremely popular plan for employees. The plan works by employer contribution and employee contribution. The employee can contribute up to 6 percent of his or her paycheck on a weekly or biweekly basis. The employer can then contribute up to a match of the employee contribution.
The IRA Plan
IRA is an acronym for individual retirement plan, and many variations of such plans exist. For example, as SIMPLE IRA is one that stands for savings incentive match plan for employees. Employees and employers can both contribute to a SIMPLE IRA plan. A Roth IRA is an example of another plan. A Roth IRA is a tax-deductible plan that people can place money into to build their futures. A Roth IRA is different from a traditional IRA in that it allows people to withdraw funds at any time without charging them penalties.
The Profit-Sharing Plan
A profit-sharing plan is a special incentive plan for employees. Employees are allowed to share the profits that the company earns based on a specific formula. New employees are usually eligible for profit sharing plans after a certain amount of time.
Stock Ownership Plan
A stock ownership plan is similar to a profit-sharing plan in that it uses something from the company. A stock ownership plan is a partial ownership of the company’s stock. The employee earns a small portion of cash when the company stocks go up and so forth.
Cash Balance Plans
Cash balance plans are special plans to which employers contribute to their employees. The employers usually make contributions to such plans at least once per year. Cash balance plans are amazing for employees on the young end of the spectrum because they grow immensely over time.
A new employee will want to ask the HR department or the benefits department about any retirement plans they offer. The new employee can start contributing to the plan as quickly as possible. The 401K plan is one of the most popular because some employers offer high contributions.